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Thursday, March 17, 2016

Adria's new owner plans profit in first year

4K Invest focuses on Adria's future following majority share takeover

Adria Airways' new owner, the turnaround fund 4K Invest, plans to swing the Slovenian carrier back into profit in 2016 by expanding its fleet and growing its operations in Estonia through Nordica, the Baltic country's new national airline, which utilises Adria's Air Operator's Certificate. 4K acquired a 96% stake in Adria through its subsidiary AA International Aviation Holding GmbH on Tuesday. It intends to acquire the remaining shares, for a 100% stake, and will make a takeover offer to the shareholders in the coming days. After naming four new members to Adria's Supervisory Board, 4K Invest has also appointed Dr. Arno Schuster to the Management Board, who is expected to replace CEO Mark Anžur soon. 4K Invest is a leading European restructuring fund registered in Luxembourg and managed out of Munich.

4K Invest anticipates for Adria to be profitable by the end of the year. "Actually, we look quite positively into this year, expecting good results. Adria's strategy seems like a good fit for a regional carrier", Mr Schuster says, adding there are no plans to make any drastic changes in terms of the carrier's network. Adria is believed to have registered a net loss of five million euros in 2015 following a small profit in 2014, although no financial results have been published so far. 4K Invest notes that several Bombardier jets will be added to the fleet during the course of this year, mainly to serve new destinations in and out of Estonia. "Adria Airways will make good connections available for business customers and offer attractive ticket prices for tourists. It will continue to serve the markets of Slovenia, Albania, Kosovo and Macedonia, connecting these countries with the world through the Star Alliance network. It intends also to grow in Estonia, a new market it entered in November 2015", Mr Schuster adds, noting, "We want to grow with our own existing network and to make it more efficient". Adria's CEO-in-waiting admits that he has no experience in the aviation sector, but says 4K Invest has experts on corporate restructuring and that human resources within the company will provide know-how.

Adria Airways' pilots, who initially scheduled a day-long strike for tomorrow, have called off the industrial action following the airline's acquisition. The union and the new owner struck a long-awaited collective bargaining agreement on Tuesday. However, Slovenian media speculate that in the coming months, Adria's new owners will lay off a number of employees. Mr Schuster says 4K Invest will "definitely look at the cost base" but did not directly respond to questions concerning possible staff cuts. The current CEO, Mark Anžur, previously noted, "The fund had said that it would stick to the current strategy. This means reducing costs per passenger, as well as an analysis of the processes and optimisation". Of the 415 staff currently employed by the flag carrier, 150 are in the back office. "This is still a little too high compared to other carriers. But we face a challenge with economy of scale because of our size. Retaining a certain standard of service requires having a certain number of staff. Therefore, it is crucial for Adria to continue growing while reducing the share of its fixed costs", he said.

As Adria Airways move right direction in privatisation, let hope Air Serbia follow same way. To be 100% privatising. Airport Nikola Tesla all so to be privatising. In normal circumstances, managing with government's birocracy is hopeless. Even monopoly das not help. Congratulation to Adria Airways. With big players future insured. Rodney & Sydneysiders✈

I agree with Radovan, the best path forward would be 100% private ownership. The problem is that in order to maintain EU Open Skies, the government owned 51% would have to be sold to either Serbian or an EU partner.

But what can Adria do? They have pretty much done everything they could. 10-15 years ago they relied on the entire Balkans to shuttle them to western Europe. Now that all those countries have more airlines flying there than Ljubljana, they can only focus on Albania, Kosovo and secondary cities in Poland (which I'm sure are well subsidised). I think they missed a huge opportunity in Macedonia where they should have set up a base. Now it's way too late with Wizz Air there. I think Adria probably has one of the best fleets out of all ex-Yu airlines, especially for low-yielding routes and let's face it the entire region is low yielding. But they also have a massive issue of having one of the smallest markets. I don't see what more they can do and I think very soon they will have issues in Pristina too when some LCC bases aircraft there. Though Adria has good brand awareness there.

Not sure for "one of the best fleets". CRJ2+CRJ7 are quite thristy, particularly compared to props such as DH8D or AT7. EMB-E2 series and Bombardier C-series are much more economical for small jets. But actually the DH8D could be of great use for them due to being faster and has longer range than the ATR - perfect for most of their routes.

Adria basing one of their CRJs in SKP sure would be a great move to connect MUC, FRA, maybe also DUS. They can take advantage of subsidies and use synergies with other SA members (LH). Really don't know what keeps them from doing so.

Good luck Adria. And finaly this is the end of nepotistic, political and frnds-like HR approach. Adria will be the first in ex-yu that will see what tought capitalism means in real. Being owned by a found is the biggest challange so far. They do take care only and nothing else but the profit. This could push Adria on higher level or even to its end. I belive that the best will come out of this as 4K as a buyer would not buy it and risk another 3,5 mio if Adria would bancrot. So many who work for Adria at the momemt should be at least bit nervous.

Investing in Adria-like airline in the 21st century is akin to investing in a horse stable at the beginning of the 20th century. A 12-year old can deduce that only low cost airlines (some, not all) and big airlines (which are directly and indirectly subsidised) will survive in the long run. The trend regarding medium/small size airlines is clear.

They do not risk 3,5 million, they risk 1 million, 3,5 million was given by the taxpayers. My 2 cents: Adria will go bust by the end of the year, 4K will make some profit by screwing the naive investors in their fund, and that will be that.

For sure they will:- lay off 50-100 workers- put experts in important positions- there will be no more "mumble-jumble" purchase of equipment- for sure they will have utilization of fleet and better route system

I hope they will (when Estonian contract expires) open base in SJJ and SKP where they can serve Star Alliance partners (FRA, MUC, DUS, BRU, ZRH, CPH) but also undeserved big destinations with low risk AMS, LHR, CDG, SVO.

I think real task of 4K is to make Adria to work on western standards with less employees and than to sell it to Lufthansa and incorporate it in LH Cityline.

@ anon 10h32: They both won't. It is also clear LH is not interested in owning airlines in ex-yu.

OU has a lot more idle potential but they must become smarter for winter time fleet utilization. They already can be profitable nowadays, even more after acquisition of 100-seaters.

JP will be trimmed to become profitable also in long term. They have a gd approach being flexible and using the equipment where they can make profit including leasing out planes. Sure they will be sold again, but I doubt they will let them being sold to someone who will not keep the brand.

Generally, the interest of any investmant fund is profit. Thair long term investments are generally associated with the low risk, dividend paying stocks. Imho aviation is too risky and volotile for any turnarround fund to be invested long term. In this case i expect them to trim the costs as much as possible, maybe invest a little more in ti, keep it for 2-3 years max and sell it to one of the competitors. That's usually how it works. LH scenario Purger mentioned above seems very plausible to me.

To me it very much seems they are overscheduling their available aircrafts that can backfire massively. Unless they already know they will lease at least one more a/c for summer.Everybody remember last summer and the large number of huge delays and cancellations due to fleet shortage and all the time broken down aircrafts (Atrs and Aviolet Boeings).

+1 anon 1:50, regardless of freeing up this and that based on all the announced increases plus new routes it is crucial to have 1 more a/c."One aircraft can do wonders."If that CRJ does 4 routes and then goes tech, JU is fu..ed.

Even 2 years old "brand new" aircraft can go tech. Adria doesn't even have an engine for CRJ9 on stock, last time they had a failure (bird strike, FOD, internal damage, a lot of stuff can cause it), aircraft was AOG for 2 weeks. Finding spare parts for CRJ in Europe is much more difficult than for A320 or B737.

Very surprised that ZAG got the upper hand over BEG. BEG was a better performing route for TK than ZAG. Hell, BEG was once 17 or 18 weekly, while ZAG got double daily flights like 2-3 years ago. There is no nationalism crap and the rest of hate bullsh*t, I was just stating facts how it was in the last 10 years. I guess their bookings must be going crazy since if you all remember ZAG was started with an A319 and was like that for a long time with eventually B737-800 later and finally double daily with A319. Now it is two flights with A320 and A321 which is impressive. BEG is mostly A320 and B737-800 which is not much diffence in capacity, but still massive increase from last summer for ZAG.

I'll tell you what will happen with Adria. This investment co will gut the airlines staff, lower cost base by stretching whoever is left until on paper, the airline looks super profitable. They will the float it and dim fund managers managing peoples pensions, investments etc.. will jump at the chance to invest. They will find out that what looked great on paper is now a POS and eventually go bust.

Adria proved that is a flexible company and I think that this was an advantage for 4K's aqusisiton. Most probably they will seek for more oportunities all arround Europe and soon or later it will become a paneuropean airline. Has a good reputation, well known brand so who would kill this. Go Adria at least for next 50 years

Adria's problem is its catchment area. The country is small without any domestic traffic, and LJU is 1 hr driving distance to ZAG, where both no. of flights and passengers are doubled, hence better alternatives offered. TRS and VCE catchment areas are overlapping with LJU too, making life difficult for the base carrier. It would be wise not to try to compete in that squeezed region, but to base aircrafts to other destinations such as Tirana, Skopje, Sarajevo etc. despite the increased cost.

EX-YU - any info about Adria getting A321 this summer? There was rumor on skyscrapercity forum and one 321 is stored in LJU since 7th March https://m.planespotters.net/airframe/Airbus/A321/519/F-GYAZ-Air-Mediterranee

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LIVERY OF THE WEEK

Jetstar special

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Australian low cost carrier Jetstar has unveiled a special livery on one of its Airbus A320s to promote the first country-specific version of the board game Scrabble. Manufacturer Mattel has included a list of local slang in its official glossary that are also featured on the jet, including words such as "Bonza", "Mollydooker" and "Devo". The A320 also includes the airline's name spelled out with Scrabble tiles. The jet is being used on both domestic and international routes and features Scrabble branding inside the cabin as well

GLOBAL AVIATION NEWS

Lufthansa, easyJet favourites for Air Berlin

Lufthansa Group and UK-based easyJet have been selected as preferred bidders for the main assets of the insolvent Air Berlin, the German carrier has confirmed. Lufthansa also submitted a bid for Air Berlin's Austria-based subsidiary Niki, which could be integrated into its LCC arm Eurowings. Air Berlin administrator Lucas Flother had planned to keep these decisions confidential until September 25, after Germany’s general elections. Air Berlin said in a statement that the creditors’ committee will continue talks with the two carriers until October 12 with the aim of selling Air Berlin's air transport assets. Talks with bidders interested in other assets will continue in parallel. Lufthansa Group CEO Carsten Spohr said at a media event in Frankfurt that Lufthansa’s bid for Air Berlin's assets is focused on securing the 38 Airbus A319/320s it wet leases from Air Berlin. The Star Alliance member is also interested in a further 20 to 40 aircraft, without creating antitrust concerns. Those 38 wet-leased aircraft carry about 1.000 passengers a day, mainly for LCC Eurowings, and Lufthansa’s priority is to keep that operation stable. Lufthansa would need around 3.000 new employees as it seeks to build market share following the exit of Air Berlin, which has 8.000 employees. However, Lufthansa is not interested in Air Berlin's long-haul routes because it said Eurowings can grow this segment on its own. Air Berlin will end long-haul operations September 25.
Source: ATW